Do you have a house to sell? Perhaps you’re thinking about selling, and maybe you’re thinking about seller financing. But if you have a mortgage on your house, you might be wondering, “Can I do owner financing if i have a mortgage on the property in TX ?” We get this question a lot, so we decided to answer that question right here… Keep reading this blog post, and we’ll answer that question and provide you with some strategies to move forward…
You have options
Homeowners who are thinking about selling their homes have several options. They can list their home through a real estate agent, they can list it themselves, or they can sell it directly to a buyer without going through the listing process. And, many homeowners are discovering a simple strategy called “owner financing” or “seller financing” that allows them to sell their home to a buyer and collect regular payments from that buyer that eventually will pay off the house:
- The buyer pays a down payment to the seller
- The buyer pays regular monthly payments to the seller
- When the agreed-upon price is paid, the title then goes to the buyer
Homeowners love it because it’s a great way to sell and a great way to find even more buyers – including those who might not be able to get traditional bank financing. Home buyers love it because it means more choices for them, and they don’t have to be as concerned about their credit score in order to buy the home like they would with a traditional bank loan.
If you own your house outright, you can do a seller financing agreement. But what happens if you have a mortgage? Maybe you’re wondering, “Can I do owner financing in TX if I have a mortgage on the property?”
The short answer is: it’s complicated.
Seller financing with a mortgage
In some states, you can create something called a “wraparound mortgage” in which you extend a mortgage to a buyer (usually at a higher rate of interest) while still paying your own mortgage to the bank. However, this is not legal in all states and in all situations, and there are additional clauses that you should be aware of. So if you currently have a mortgage, you’ll want to check on your state’s rules and make sure that your lender will allow you to do seller financing while you still have a mortgage on the property.
Can I Do Owner Financing if I Have a Mortgage on the Property? – You have choices
If you’re unable to sell with seller financing because of a mortgage, you have other options…
An alternative that might work for you is called rent-to-own, which has some similarities (such as an ongoing payment from the renter/buyer but you still own the house). Some differences are there might not be a down-payment to you and the buyer would need to qualify for a mortgage from a bank at the end of the pre-established rental term, which will largely depend on their work situation at that point in time and their credit info.
If you’re thinking about accepting owner financing but you still have a mortgage on your property, here’s another option for you: Get in touch with us and talk to us about your property. As experts in buying and selling real estate, we’re aware of a number of options that you might not know about. We can walk you through those options and potentially help you out ourselves or we can connect you with someone who can help you.